The U.S. economy added jobs at a much faster pace than expected in October, while the unemployment rate fell thanks to surprising strength in the job market.
Nonfarm payrolls increased by a seasonally adjusted 165,000 for the month, compared with the Dow Jones estimate of 59,000, the Bureau of Labor Statistics reported Friday.
The unemployment rate fell to 4.1%, compared to 4.2% forecast. A broader measure including discouraged workers and those in part-time employment for economic reasons reached 7.9 percent, up 0.3 percentage points, amid a 421,000 increase in the civilian labor force.
In addition to October’s large payroll increases, previous months saw significant upward revisions: August’s figure rose to 186,000, an upward revision of 53,000, while September’s figure rose to 60,000 after an upward revision of 31,000.
“You have to look hard to find anything to not like about it,” Dan North, senior economist at Allianz Trade North America. “It’s a very, very good report, and overall I think it looks like it’s stronger than expected and the best in a while, and it’s sort of consistent with what I call a stable but maybe unexciting job market.”
Payroll gains were also better than expected. The average hourly wage increased by 0.4% over the month and 3.1% over the year, compared to respective estimates of 0.3% and 2.9%. The average work week remained unchanged at 34.4 hours.
“Today’s jobs report is a powerful rebuttal to fears that the economy is headed for a significant slowdown,” said Seema Shah, chief global strategist at Principal Asset Management. “Payroll growth surprised firmly to the upside, unemployment fell to 4.1% and job creation remains widespread, reflecting an economy that continues to comfortably absorb labor rather than one that is starting to buckle under tighter financial conditions.”
The magnitude of job growth was also strong, bucking a trend in which health care accounted for the bulk of the gains.
Professional and business services saw an increase of 70,000, ranking first among all sectors, followed by health care with 42,000. Other areas seeing notable growth include transportation and warehousing (25,000) and manufacturing (19,000).
“Overall, the job market is in a much better position than it was a year ago,” said Heather Long, chief economist at Navy Federal Credit Union. “In 2025, the economy created just 10,000 jobs per month and virtually all of them were in the health care sector. … There is a much wider range of opportunities.”
This report comes in the same week as an election in which the economy and particularly inflation were the center of attention. Democrats have staged a nationwide rout that will give them control of both houses of Congress after an intensive campaign on affordability issues.
For the Federal Reserve, the report also comes at a pivotal time. Central bankers are weighing whether to resume raising interest rates in December, as inflation remains stubbornly above the central bank’s 2% target.
Traders have increased the likelihood of another hike by a quarter of a percentage point when the Federal Open Market Committee meets on December 8-9. The odds increased to 76.8%, according to CME Group’s FedWatch tool, although the indicator showed only one additional increase after that. The chances of further increases in 2027 have diminished somewhat in recent days, after the midterm election rout and the liquidation of technology stocks on Thursday.
Elsewhere, market reaction was muted, with a mixed picture for stock market futures ahead of the open. Treasury yields were higher overall.
The proportion of workers looking for work or already working as a share of the labor force, known as the labor force participation rate, increased slightly to 61.9%. The labor force had declined, due to demographic changes and reduced immigration, but increased by 421,000 people in October.
At the same time, the household report, used to calculate the unemployment rate, shows an additional 463,000 people in work.
However, long-term unemployment has increased sharply.
The average duration of unemployment increased to 27.1 weeks, an increase of 2.3 weeks compared to the previous month, reaching its highest level since September 2021. The number of unemployed for more than 27 weeks increased to 1.96 million, the highest level since December 2021.
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